Selecting Great Microfinance Partners (Part 1)

By Guest Author Robert Lowry, Unitus

The challenge of finding great microfinance institution partners is one every microfinance fund faces. At Unitus, selecting the right partners is critical to reaching our growth goals. We’re often asked, How do you select your partners? This article will answer that question by providing a brief overview of the Unitus selection process.

Unitus is helping develop the next generation of large, innovative and commercially-minded microfinance institutions (MFIs). Building up tomorrow’s leaders means identifying and scaling up smaller, high-potential institutions today, and toward this objective we created the Unitus Selection Team. Based in Redmond, Washington and
Bangalore, India, the Team seeks out MFIs that, working with Unitus, will be able to grow 10x their current size and reach 100,000 clients within five years. The Team focuses on two kinds of microfinance institutions: Emerging MFIs and commercial startup MFIs.

Let’s take a closer look at the different categories of MFIs:

* A Players: These are industry leaders, serving more than 100,000 clients; they’re long-established and already accessing capital markets for most of their funding needs.
* B Players: These emerging MFIs usually have around 2,500 clients or more; they’re early in the growth stage but have a track record of some growth, and basic management information systems are in place.
* C Players: MFIs at this level have fewer than 2,500 clients, no systems in place, and low potential for growth.
* D Players: Commercial startup MFIs. While they have no clients yet, these MFIs have in place a strong methodology for sustainable growth. They’re adequately capitalized to build their own foundation for growth immediately. Commercial startups are often created by entrepreneurs.

Why do we focus on emerging MFIs and startups—the B and D players? A large MFI already has access to the capital markets and other resources it needs; with a small, newly formed nonprofit MFI, it’s too early to tell if it’s viable. Therefore, emerging MFIs and commercial startups usually make the best candidates to become Unitus partners. But there are many other factors our Selection Team considers before a partnership offer is made.

In Sunday’s post we’ll discuss these other factors.

This segment is part 1 in the series : Selecting Great Microfinance Partners
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